With a commitment in hand to sell up to $35 million of its own common stock, DNAPrint genomics Inc. agreed to spend $25 million for a 51.8 percent stake in the Leverkusen, Germany-based pharmaceutical firm Biofrontera AG.
"It's a different approach," said Richard Gabriel, president and CEO of Sarasota, Fla.-based DNAPrint, adding that the funding route "certainly is dilutive, but at the same time there aren't many options out there for biotech companies that are in need of cash."
The company's stock (OTC BB:DNAP) closed Wednesday at 2 cents, up 46.7 percent from the previous closing of .007 cents.
Under the terms, DNAPrint agreed to invest 20 million (about US$24.6 million) over 24 months in Biofrontera's Series B preferred shares (or 68 percent of the B shares), which amounts to a 51.8 percent equity interest.
DNAPrint is obligated to close the transaction and to begin paying the purchase price for the shares only after sales of common stock begin under DNAPrint's pact with Dutchess Private Equities Fund LP in Boston to buy $35 million in DNAPrint common stock over the next two years.
"Venture capitalists have sort of disappeared from the horizon," Gabriel said. "They're there, but the cost is exceptionally high." The Biofrontera deal gives DNAPrint shareholders an opportunity to become venture capitalists themselves, he noted.
Through the deal, DNAPrint aims to transform itself from a population-genomics company into a genomics-based pharmaceutical firm developing, what it calls "Theranostics" products, which blend genomics tests with drugs designed to treat targeted patient segments.
Biofrontera will use the proceeds, which brings the firm's value to $51 million, for advancement of its clinical and preclinical drug pipeline. The lead candidate, BF-Derm1, is in Phase II trials for severe, antihistamine-refractory chronic urticaria (chronic itching and scratching). The first interim report of a European adaptive Phase II study showed the compound, a histidine decarboxylase inhibitor, reduced urticaria symptoms by 30 percent to 40 percent with no relevant side effects.
"We're not saying [DNAPrint's approach] is the answer for everything," Gabriel told BioWorld Today, but "we are going to try to use it on all of the medications brought through the Biofrontera pipeline." Also in preclinical works from Biofrontera are a novel prophylactic migraine treatment and others.
DNAPrint, for its part, made news this summer with an upgrade to the DNAWitness 2.5 product for physical profiling from DNA, with a database that lets forensics investigators reconstruct a physical profile from DNA left at a crime scene. In August, the firm's AncestrybyDNA 2.5 product was featured in Nature Reviews, which highlighted DNAPrint's BioGeographical Ancestry admixture test.
The bad rap for genomics is changing, Gabriel said.
"It seems like the genomics curse is only in the minds of large pharma, because they haven't been able to make it work," he said. "The fact is, we do make it work."
The company's DNA tests recently helped authorities nab an alleged serial killer in Louisiana, a feat Gabriel called "the tip of the iceberg. We're the only company that's been able to do that."
But the first work was with Taxol (paclitaxel), the chemotherapeutic agent introduced in 1993 by Bristol-Myers Squibb Co., of New York. DNAPrint located responders (with a 95 percent rate) as distinguished from non-responders (with about a 50 percent rate).
Testing "isolates the high-risk candidates the physicians can pay more attention to," Gabriel said, noting that Taxol's general response rate is "30 percent to 40 percent at best, and there's some fudging so it might be as low as 20 percent."
Gabriel said he would like to return to an era that resembles "the good old days," when physicians had plenty of information about patients and their treatment before the treatment - except that now physicians would have even more information, enough to get efficacy rates up to 80 percent or 90 percent.
"We think the FDA is on board with this," Gabriel said, pointing to former FDA Commissioner Mark McClellan's "outstanding" pharmacogenomics initiatives.
"It's not easy," said Gabriel, formerly with Pharm-Eco Laboratories Inc., of Lexington, Mass. "We're trying."